Outsourcing Governance: Why Insight Beats Oversight

This is an excerpt of the original article. It was written for the January-February 2012 edition of Supply Chain Management Review. The full article is available to current subscribers.

January-February 2012

The potential risk of supply chain disruption has never been greater. In fact, it’s become the new normal, say authors and educators Robert Trent and Greg Schlegel. The problem for many companies is that they are ill prepared to handle a disruption should one occur. This article argues for a new set of risk management techniques in a world where heightened supply chain risk has become a fact of business life.

Browse this issue archive.

Already a subscriber? Access full edition now.

Need Help?

Contact customer service

847-559-7581   More options

Not a subscriber? Start your magazine subscription.

For many years, companies have looked to outsourcing as a way to reduce costs and increase supply chain productivity. But according to studies by the Corporate Executive Board, up to 90 percent of the value of an outsourcing deal can be eroded because of poor relationship governance. The Outsourcing Center, an internet site for supply chain thought leadership, agrees. The center reports that poor governance plays a role in outsourcing failures as much as 62 percent of the time. The value erosion or “savings leakage” that can result from poor governance is, in fact, a pressing problem for companies today.

Proper governance in an outsourcing arrangement is critical because the supplier or service provider becomes an extension of the company doing the outsourcing. A sound governance structure provides consistent management along with cohesive policies, processes, and decision rights that enable parties to work together effectively and collaboratively over the life of the agreement. Perhaps most importantly, good governance maximizes the potential for successful contract implementation.

This article explores the nature of good governance within the context of Vested Outsourcing, a concept that is being researched and advanced through work at the University of Tennessee.

This complete article is available to subscribers only. Click on Log In Now at the top of this article for full access. Or, Start your PLUS+ subscription for instant access.

Not ready to subscribe, but need this article?
Buy the complete article now. Only $20.00. Instant PDF Download.
Access the complete issue of Supply Chain Management Review magazine featuring
this article including every word, chart and table exactly as it appeared in the magazine.

SC
MR